Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: This proposed rule
would allow carriers who offer consumer price index (CPI)
based inflation protection for partnership policies to offset
any negative growth in CPI in a given year against positive
growth in CPI in any subsequent year, so long as benefits are
never decreased below zero for any given year.

Reasons Supporting Proposal: John Hancock submitted a
petition for amendment so that four thousand of their
policyholders would be eligible to participate in the
partnership program.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The only businesses
affected by this proposed rule are long-term care product
insurers. None of the active, licensed long-term care product
insurers in Washington state are domestic small businesses.
Therefore, a small business economic impact statement is not
required for this proposed rule.

(1) As used in WAC 284-83-400 through 284-83-420,
"qualified long-term care partnership policy" or "partnership
policy" means a long-term care policy that meets all of the
following additional requirements:

(a) The policy was issued on or after January 1, 2012, or
exchanged as provided in WAC 284-83-415 on or after January 1,
2012, and covers an insured who was a resident of this state
or of another state that has entered into a reciprocal
agreement with this state when coverage first became effective
under the policy.

(b) The policy is a tax qualified long-term care
insurance policy as defined in Section 7702B(b) of the
Internal Revenue Code of 1986 (26 U.S.C. 7702B(b)).

(c) The policy provides at least the following levels of
inflation protection:

(i) If the policy is sold to an individual who has not
attained age sixty-one as of the date of purchase, the policy
must provide automatic annual compounded inflation increases
at a rate not less than three percent or automatic annual
compounded inflation increases at a rate based on changes in
the consumer price index((, not to be less than zero
percent)).

(ii) If the policy is sold to an individual who has
attained age sixty-one but has not attained age seventy-six as
of the date of purchase, the policy must provide automatic
simple inflation increases at a rate not less than three
percent or automatic inflation increases at a rate based on
changes in the consumer price index((, not to be less than
zero percent)).

(iii) If the policy is sold to an individual who has
attained age seventy-six as of the date of purchase, the
policy may, but is not required to, provide automatic
inflation increases at a rate based on changes in the consumer
price index((, not to be less than zero percent)).

(iv) If the change in the consumer price index is a
negative number for the time period in question, the carrier
may not apply the change in the index to reduce the benefit
payable under the partnership policy. However, the carrier
may offset this negative number against the next annual
increase in the consumer price index to reduce the automatic
inflation increase which would otherwise occur during that
year. If the negative consumer price index exceeds the next
annual increase in the consumer price index, it may be offset
against multiple annual increases, the net effect of which may
never be less than zero.

(v) For purposes of this section, "consumer price index"
means the consumer price index for all urban consumers, U.S.
city average, all items, as determined by the Bureau of Labor
Statistics of the United States Department of Labor.

(2) Issuers must file a long-term care insurance policy
for approval for use as a partnership policy. The long-term
care Partnership Policy Certification Form must be completed
and accompany the request for approval. The form is available
on the commissioner's web site: www.insurance.wa.gov.

(3) Issuers requesting to make use of a previously
approved policy form as a qualified state long-term care
partnership policy must:

(a) Submit to the commissioner a Partnership Policy
Certification Form signed by an officer of the company; and

(b) File for approval an amendatory rider or endorsement
indicating the policy is partnership qualified.

(4) An issuer or its agent, soliciting or offering to
sell a policy that is intended to qualify as a partnership
policy, must provide to each prospective applicant a
Partnership Program Notice found on the commissioner's web
site: www.insurance.wa.gov, outlining the requirements and
benefits of a partnership policy. The Partnership Program
Notice must be provided with the required outline of coverage.

(5) A partnership policy issued for delivery in
Washington must be accompanied by a Partnership Status
Disclosure Notice found on the commissioner's web site:
www.insurance.wa.gov, explaining the benefits associated with
a partnership policy and indicating that at the time issued,
the policy is a qualified Washington state long-term care
insurance partnership policy. The Partnership Disclosure
Notice must also include a statement indicating that by
purchasing this partnership policy, the insured does not
automatically qualify for medicaid.